https://www.insurerbrain.com/w/index.php?action=history&feed=atom&title=Definition%3AIncurred_loss_retrospectiveDefinition:Incurred loss retrospective - Revision history2026-06-13T18:02:43ZRevision history for this page on the wikiMediaWiki 1.43.8https://www.insurerbrain.com/w/index.php?title=Definition:Incurred_loss_retrospective&diff=11139&oldid=prevPlumBot: Bot: Creating new article from JSON2026-03-11T17:25:41Z<p>Bot: Creating new article from JSON</p>
<p><b>New page</b></p><div>🔄 '''Incurred loss retrospective''' is a [[Definition:Retrospective rating | retrospective rating]] plan in which the final [[Definition:Premium | premium]] charged to a [[Definition:Policyholder | policyholder]] is adjusted after the policy period based on the insured's actual [[Definition:Incurred claims | incurred losses]], subject to pre-agreed minimum and maximum premium boundaries. Widely used in [[Definition:Workers' compensation insurance | workers' compensation]], [[Definition:Commercial general liability (CGL) | general liability]], and [[Definition:Commercial auto insurance | commercial auto]] programs for large accounts, this approach aligns the cost of coverage more closely with the insured's own [[Definition:Loss experience | loss experience]] rather than relying solely on class-based manual rates.<br />
<br />
⚙️ At inception, the [[Definition:Insurance carrier | insurer]] collects a deposit or provisional premium. Once the policy period closes and sufficient [[Definition:Loss development | loss development]] data accumulates, the carrier recalculates the premium by applying a [[Definition:Loss conversion factor (LCF) | loss conversion factor]] and a [[Definition:Tax multiplier | tax multiplier]] to the insured's incurred losses—paid claims plus [[Definition:Outstanding claims reserve | outstanding reserves]]—and adding a [[Definition:Basic premium | basic premium]] that covers the insurer's fixed costs and [[Definition:Profit load | profit load]]. The result is bounded by a minimum premium (protecting the carrier if losses are unusually low) and a maximum premium (capping the insured's exposure). Periodic adjustments, sometimes spanning several years, continue as [[Definition:Claims handling | claim values]] mature and reserves are revised.<br />
<br />
đź“Š The incurred loss retrospective plan occupies an important middle ground between guaranteed-cost insurance and full [[Definition:Self-insurance | self-insurance]]. It rewards policyholders who invest in [[Definition:Loss control | loss control]] and [[Definition:Risk management | risk management]] with tangible premium savings, while still transferring catastrophic or volatile risk to the [[Definition:Insurance carrier | carrier]] through the maximum premium cap. From the insurer's standpoint, aligning premium with actual performance reduces [[Definition:Adverse selection | adverse selection]] and keeps large accounts engaged in managing their own risk. However, the plan introduces complexity in [[Definition:Financial reporting | financial reporting]] and [[Definition:Cash flow | cash flow]] management, since both parties must account for multi-year premium adjustments. Disputes sometimes arise over [[Definition:Reserve adequacy | reserve adequacy]] and the timing of adjustments, making clear contractual terms and transparent [[Definition:Loss reporting | loss reporting]] essential.<br />
<br />
'''Related concepts'''<br />
{{Div col|colwidth=20em}}<br />
* [[Definition:Retrospective rating]]<br />
* [[Definition:Experience rating]]<br />
* [[Definition:Loss-sensitive program]]<br />
* [[Definition:Workers' compensation insurance]]<br />
* [[Definition:Self-insured retention (SIR)]]<br />
* [[Definition:Basic premium]]<br />
{{Div col end}}</div>PlumBot